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The week ahead is set to bring a deluge of economic data that has the potential to come in far below expectations and rattle financial-market participants, who have already been through weeks of tariff-driven volatility.
Read: How stock-market investors are navigating the wait for Trump trade deals
On Monday, the Dallas Fed’s survey on the Texas manufacturing outlook, which included questions on the impact of tariffs, revealed that perceptions of broader business conditions worsened notably this month. The general business-activity index fell 20 points to minus 35.8 for its lowest reading since May 2020. The Dallas Fed report wasn’t big enough to move financial markets, but it still offers a potentially ominous sign for investors of what may come this week.
Still ahead over the next handful of trading sessions are consumer-confidence data for April from the Conference Board, which will be released Tuesday, and an advance estimate of first-quarter gross domestic product on Wednesday. Also on Wednesday will be ADP’s report on private-sector hiring for April and the PCE inflation report for March.
April data from S&P Global’s final U.S. manufacturing purchasing managers’ index and the Institute for Supply Management’s manufacturing PMI will be released on Thursday. And the nonfarm payrolls report for April arrives on Friday.
Bill Adams, chief economist for Comerica Bank in Dallas, expects this week’s data to come in below expectations and to be weighed down by anxiety from businesses and consumers over the economy’s trajectory. He expects nonfarm payroll gains on Friday of only 115,000 for April, down from 228,000 during March and below the 130,000 consensus estimate. Adams also anticipates the consumer-confidence reading will fall to 80 for April from 92.9 in March, which would be below the consensus estimate of 87. Meanwhile, real first-quarter GDP should come in at minus 1.4% versus the 0.2% consensus forecast and the 2.4% increase seen in the final three months of last year, he said.
Given a big increase in anxiety seen by consumers and businesses over the economy in April, “I’m forecasting for that to show across a variety of hard economic indicators in the coming weeks,” Adams said via phone on Monday. “If the economic data comes in worse than expected in the next couple of weeks, then it would be fair to say that forecasters will be pressured to further mark down their outlooks for the year ahead.” Meanwhile, “we are likely in a period of elevated volatility in markets and the question is if a further deterioration in the growth outlook would convince market participants that the Fed will cut rates soon despite inflation pressures.”
Despite implementing a delay on big reciprocal tariffs against most countries until July, President Donald Trump’s trade war has already led to a slump in shipments at U.S. ports, a rising perceived risk of a global recession and surging inflation expectations among most Americans. Heightened worries over supply shortages are coming into focus again as shipping-container traffic between the U.S. and China has plunged. Some people have argued that the damage has already been done in financial markets, by making U.S. assets like the dollar and perhaps stocks less attractive to investors in the long run.
In Adams’ view, “if policy pivots real soon, there’s still a path for the economy to reaccelerate and register decent economic growth in 2025. But if tariff rates stay at present levels, this will cause big disruptions in supply chains and likely a big slowdown in business capital expenditures and hiring this year.”
As of Monday afternoon, U.S. stocks DJIA SPX COMP were lower as investors await a busy week of data and corporate earnings from companies such as Amazon.com Inc. AMZN, Microsoft Corp. MSFT, Apple Inc. AAPL, Meta Platforms Inc. META. Treasury yields also moved lower after ending Friday’s session with a second week of declines. Separately, fed-funds futures traders were gravitating toward the likelihood of three to five quarter-point interest-rate cuts from the Federal Reserve by year-end.
After a recent bounce that left all three major U.S. stock indexes higher for last week, equities “could be a bit more choppy as the economic and corporate profit weakness starts to materialize,” said David Lefkowitz, head of U.S. equities for UBS Global Wealth Management. “But we continue to believe President Trump’s most extreme tariff rhetoric is largely a negotiating tactic rather than a landing zone for the ultimate tariff rates.”
Moreover, Lefkowitz wrote in an email, “it should be clear that President Trump is attuned to the market and economic risks from his tariff policies. We therefore think trade frictions will continue to decline, although not in a straight line. Economic and corporate profit growth should rebound next year after the tariff impacts are absorbed. As markets begin to anticipate this, we believe the S&P 500 can rise to 5,800 by year-end.”
This post was originally published on Market Watch
